What are the latest regulations on securities subjects eligible for making provisions for loss on investments in Vietnam?
What are the general principles in making provisions in Vietnam?
According to the provisions of Article 3 of Circular 48/2019/TT-BTC providing guidance on making and settlement of provisions for devaluation of inventory, losses on financial investments, bad debts and warranty at enterprises, general principles in making provisions are:
Article 3. General principles in making provisions
1. Provisions prescribed in this Circular are deductible expenses when determine the taxable incomes of an enterprise in its annual financial statement and constitute a financial source for enterprises to offset possible losses in the plan year so as to preserve their business capital and ensure that enterprises do not reflect the value of inventories and financial investments higher than their market prices and the value of their receivable debts higher than their recoverable value at the time of making the annual financial statement.
2. The making and reversal of provisions are conducted at the time of making financial statement.
3. Enterprises consider issuing regulations on the management of supplies, goods, investment and debts so as to reduce business risks. The regulation must clearly define responsibilities of each section or person engaged in the monitoring and management of supplies, goods, investment and recovery of debts.
4. Enterprises shall not make provisions for overseas investment.
What are the old regulations on eligible for making provisions for loss on investments in Vietnam?
Previously, according to the provisions of Point a, Clause 1, Article 5 of Circular 48/2019/TT-BTC providing guidance on making and settlement of provisions for devaluation of inventory, losses on financial investments, bad debts and warranty at enterprises, the subjects to make provisions for loss on investments include:
Article 5. Provisions for loss on investments
1. As for securities investments:
a) Provisions shall be made for devaluation of securities issued by domestic business organizations in conformity with law on securities which are owned by an enterprise at the time of making the annual financial statement and satisfy the following conditions:
- The securities are listed or registered for transactions on securities market.
- The securities are eligible for free trading on the market and having the market price at the time of making the financial statement lower than the book price.
What are the latest regulations on securities subjects eligible for making provisions for loss on investments in Vietnam?
According to the provisions of Article 1 of Circular 24/2022/TT-BTC amending Circular 48/2019/TT-BTC providing guidance on making and settlement of provisions for devaluation of inventory, losses on financial investments, bad debts and warranty at enterprises, Point a, Clause 1, Article 5 of Circular 48/2019/TT-BTC is amended as follows:
Article 1. Amendments and supplements to several Articles of the Circular No. 48/2019/TT-BTC, providing instructions about creation and management of provisions for devaluation of inventories, loss of investments, bad debts and warranties for products, goods, services or construction works at enterprises
1. Amending and supplementing point a of clause 1 of Article 5 as follows:
“a) Securities subject to the provisioning requirement are types of securities issued by domestic business entities in accordance with law; under the ownership of enterprises; listed or registered for trades to be performed on the domestic securities market; freely traded on the market at the actual price determined at the time of completion of annual financial statements which is less than the book value of investments in securities
Government bonds, Government-guaranteed bonds and municipal bonds are exempted from such provisioning requirement.”
Thus, securities subjects eligible for making provisions for loss on investments under the old regulations have the following changes:
It retains securities subject to the provisioning requirement that are types of securities issued by domestic business entities in accordance with law; under the ownership of enterprises; listed or registered for trades to be performed on the domestic securities market; freely traded on the market at the actual price determined at the time of completion of annual financial statements which is less than the book value of investments in securities However, Government bonds, Government-guaranteed bonds and municipal bonds are exempted from such provisioning requirement under the latest regulation.
Circular 24/2022/TT-BTC officially takes effect from May 25, 2022.
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